While the DXY continues to languish in the depths of Ben Bernanke’s sado-maso dungeon, money allocated to new reserve currencies: gold and silver continues unabated. Earlier, gold was on the verge of breaking out to fresh all time highs, while silver at last check just hit a fresh 31 year high, pennies away from $38. And just $10 dollars from its all time Hunt Brothers nominal highs.
And while it is more than obvious to all what is precipitating this flight to a self-imposed gold (and silver) standard, here is Reuters attempted take on explaining things:
Gold and silver prices rose on Thursday as jitters over the euro zone sovereign debt crisis, violence in the Middle East and worries over radiation leaks in Japan conspired to blunt risk appetite.
Gold prices climbed back towards record highs above $1,440 an ounce and silver touched a fresh 31-year high at $37.72 as investors turned to precious metals as a haven from risk.
“Given the geopolitical environment, concerns about Portugal and other peripheral countries, euro zone debt concerns and the still extremely low interest rate environment, it is not surprising the trend is your friend,” said Commerzbank analyst Eugen Weinberg.
Concern over the indebtedness of some smaller euro zone members returned to the spotlight on Thursday after Portuguese prime minister Jose Socrates resigned, a move set to dominate a summit of EU leaders starting Thursday.
Among other commodities, U.S. oil prices extended gains on Thursday, rising back above $106 a barrel as concerns over ongoing violence in the Middle East and North Africa outweighed worries over the financial health of the euro zone.
Gold tends to benefit from higher oil prices, both because it is sometimes seen as a hedge against oil-led inflation, and because it is often traded as part of a commodity basket dominated by crude oil.
Western warplanes hit Libya for a fifth night on Thursday, but so far have failed to stop Muammar Gaddafi’s tanks shelling rebel-held towns or dislodge his armour from a strategic junction in the east.
Other clashes have been reported in Yemen and Syria in recent days.
“Risk appetite remains hobbled by geopolitical tensions,” Credit Agricole analyst Robin Bhar said in a weekly note. “The Libyan crisis has, if anything, intensified over the last week with the advent of Western bombing.”
Elsewhere, concerns persisted in Tokyo over radiation leaking from a nuclear plant crippled in the earthquake and tsunami that hit northeast Japan earlier this month.
As usual, any “strength” in stocks will be merely a reflection of the ongoing decimation in the dollar, with the real value of the stock market unchanging, and only superficial cable propaganda channels extolling the virtues of nominal price changes.
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